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GTAP Resource #4372

"A Carbon Tax and the Risk of Inequity"
by Combet, Emmanuel, Frédéric Ghersi, Jean-Charles Hourcade and Camille Thubin

This paper aims at clearing up some misunderstandings about the right way to limit social impacts of carbon taxes that proved to be a decisive obstacle to their implementation.

We use a static general equilibrium model that represents an open-economy constrained by international competition, energy dependency, inequalities and unemployment. The model is calibrated and applied to France. It distinguishes four types of agents (households disaggregated into different groups, firms, public administrations, and the ‘rest of the world’) and four productions (crude oil, automotive fuels, other energies for housing and a composite good aggregating all non-energy goods and services).

The model relies on a coherent system of national accounting that has been specifically extended to the interfaces between the economy, the environment and the social dimension. First, the flows of energy are described precisely thanks to an effort to harmonize energy data with the national accounts. Second, the distribution of national aggregates between categories of households is detailed using microeconomic data coming from an income and expenditure survey ("Budget des Familles"). In addition, the flexibility of the model allows us to analyze the sensitivity of the results to different dimensions of social inequalities. On the one hand, we consider twenty income classes (households ranked by their standard of leaving), and on the other six geographical classes (households ranked along the rural-urban distinction).

We are therefore able to trace direct and indirect effects of various scheemes of carbon tax reform on twenty groups of the income distribution, as well as looking at effects on the Gini condition and on the plight of the poorest. We are also able to analyze regional variations and distribution along the rural-urban distinction – using a number of rather fine distinctions ranging from the purely rural to Paris.

In the analysis, we first highlights the gap between t...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2013
Created: Combet, E. (4/8/2014)
Updated: Combet, E. (6/26/2014)
Visits: 2,713
- Climate change policy
- Economic analysis of poverty
- Other data bases and data issues
- Europe (Western)

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